Amarin (AMRN): Management Is Flying in the Dark

A lot of Amarin (AMRN) stock bulls expected shares to fly up toward $30 following shockingly good results of the company’s Reduce-It cardiovascular outcomes study of Vascepa, its omega-3 fatty acid drug derived from fish oil. Analysts have pegged future peak annual sales estimates for Vascepa at $2 billion to $4 billion sometime in the 2020s. However, the fish oil drug maker is still experiencing relatively soft sales. Amarin released guidance suggested that it will sell just $350 million of Vascepa in 2019. That was well short of the market’s expectations. Since then, investors had a keen focus on the issues around the commercial uptake of Vascepa.

To help investors tackle these concerns, H.C. Wainwright analyst Andrew Fein met with management this week in San Francisco . Here are a few insights from the meeting:

“What goes into the assumptions for the 2019 revenue guidance? Admittedly, management had limited insight into the guidance and the honest outlook for the 2019 revenue was “we really don’t know”. According to the company, the revenue guidance of $350M or about 50% YoY growth was based on the initial feedback from the market (2 months of promotion), bottom-up analysis, physician calls and surveys as well as some educated guesses. Since the label expansion is not approved yet, it is also unclear how that may impact sales upon approval. In addition, the off-label promotion has not done to this degree, and the company is creating a new space for a new treatment paradigm with many unknown factors. As a result, management was “really flying a bit in the dark” in terms of revenue projection.”

“Due to the seasonal donut hole headwinds in 1Q19, the company thinks that 4Q18 sales are a good starting point for modeling purpose, and believes that 50% YoY growth is achievable, and that final sales could exceed the guidance. Another key factor for the revenue guidance is whether the FDA would approve the sNDA faster than the normal process. The company plans to submit the sNDA by 1Q19 and assumes the base scenario of a normal approval timeline. If an accelerated approval occurs, this could positively impact revenue. Importantly, the company also has plenty of inventory on hand to satisfy the anticipated increasing demand,” the analyst contnued.

All in all, Fein reiterates a Buy rating on AMRN stock with a price target of $51, which represents a potential upside of 195% from where the stock is currently trading. (To watch Fein’s track record, click here)

Overall, TipRanks showcases AMRN as one of Wall Street’s best-liked stocks. Out of 5 analysts polled in the last 3 months, all 5 are bullish on Amarin stock. With an encouraging return potential of 75%, the stock’s consensus target price stands at $30.20.


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